The Market’s Wild Ride: US-Iran Deal Hopes, Oil Drops & Gold Soars | Kenny Polcari

Well, good morning. Yes, it's me, Kenny Polcari, your host of the party. Today's Thursday, May 7th, 2026, and oh boy, what a day it was yesterday. And here are the things you need to know to get your day started. Well, just remember, hope is not really a strategy. It was yesterday, but think about it. It was risk on after the headlines suggest what? That a deal between the US and Iran is close. Bond surge, gold surges, oil yields, and the VIX all decline. But the strait is still closed and ships remain anchored. And what do we have for dinner tonight? Well, it's the beginning of the rest of the cookbook. Try Papa Richard's El Camino cheesesteak. We'll get to that in a moment. So yesterday it was all about hope. Hope that the US and Iran are finally inching towards some kind of a framework deal. Hope that the Strait of Hormuz eventually reopens. Hope that oil prices continue to fall, hope that inflation pressures ease, and hope that the Fed may not have to stay restrictive much longer. And that's assuming that you think the Fed is restrictive. I do not, but apparently a lot of people do. And as a result, stocks ripped higher, bonds rallied, yields fell, oil collapsed, the dollar weakened, gold surged, and the VIX fell. And those moves caused investors, traders, and algos to rush in and go risk on. After they assume that the worst-case geopolitical scenario is not going to happen after all, at least not yesterday. And that's a big assumption because Iran really can't be trusted at all. And now we're supposed to believe after 47 painful years that they want to play nice in the sandbox? Okay, we can go with that because that's what the market believed yesterday and maybe even a little bit today. Now stocks surged at the end of the day. The Dow added 612 points. Or 1.25%. The S&P rose 105 points, or 1.5%. The NASDAQ added 512 points, or 2%. The Russell added 42 points, 1.5%. All three closing at all new time highs. The transports added 345 points, or 1.7%. The Equal Weight S&P added 65 points, or 0.8%, while the Mag Seven tacked on 697 points, or 2%. Now just FYI, as of last night, The year-to-date performance is kind of impressive considering the landscape. The Dow's up 3.8%, the S&P's up 7.6%, the NASDAQ is up 11.2%, and the Russell's up 16.3%. The transports are up 17%, the equal-weight S&P is up 6%, while the Mag 7 is up 4.5%. Now considering where we were a month ago, that's pretty damn good. Now once again, tech led the way higher yesterday, thanks again to another monster move in the semiconductors. After AMD reminded investors, as if anyone needed to be reminded, that the AI trade is alive and well and still accelerating. Recall on Tuesday evening, AMD delivered strong earnings, strong guidance, and more importantly, reassured investors that the hyperscalers are still spending aggressively on AI infrastructure, data centers, chips, networking, and compute power. And that was all the algos and the Momo crowd needed to hear. And then to add fuel to the fire, think about all those emotional investors that were feeling FOMOized because they sold stocks when they get nervous as they try to continue to time the market, trying to pick tops and then bottoms rather than just building a portfolio that will spend time in the market, which is always the winning strategy. And then there were those shorts, they got caught with their pants down thinking the deal was not even close, that the market was going to go lower. And that they all had to run for cover after the headlines hit the tape, which only added to the surge higher. Of the 11 S&P sectors, tech gained the most, up 2.7%. Industrials right behind it, plus 2.6%. Basic materials rose 1.7%. Consumer discretionary rose, uh, 1.5%. Communications also up 1.5%. Real estate was up 1.3%. Consumer staples added 0.2%. Healthcare added 0.1%. Now, energy fell 4% and utilities lost 1.4%. Now, energy is easy to understand. Oil fell 6% to end the day at $96.20. So that sector got whacked. But now both energy and utilities have had a strong run, right, during the first part of this year. The energy sector was up 34% in the first quarter while utilities were up 8.3% in the first quarter, outperforming the broader market as investors found refuge in those sectors as the conflict unfolded across the global stage. Yesterday though, there was a partial giveback of that outperformance because remember, both sectors got bought as a hedge against the conflict. So both gave back ground when the headline suggested that, guess what, the conflict may be ending. Just FYI, energy is still up 27% year to date and utilities are still up 7% year to date. So nothing really to, you know, sneeze at. And to be clear, on a day when the NASDAQ is up 2%, AMD is up 18%, ARM is up 13%, Intel's up 4.5%, Qualcomm's up 3%, and the Sox was up 5%, nobody is really reaching for oil companies or regulated electric companies. They're just not sexy enough. But let's be clear, the real story yesterday was all about how oil reacted to the headlines, because for the last 2 months, the headlines have driven oil higher, fueling that inflation narrative. Every move higher in crude raised fears about what? Gasoline prices, transportation costs, food inflation, manufacturing costs, all of it. Rising oil became the excuse for, for higher Treasury yields, a stronger dollar, and a Fed trapped in the higher for longer mode. So when oil fell 6% after the headline suggested that the US and Iran may actually be making great progress towards the deal, guess what? The script got flipped. And just like that, investors went from inflation panic to inflation relief. And once oil rolled over, Treasury yields followed. Bonds caught a bid. The TLT and TLH both up 8/10. The 2-year yield fell 7 bps to 3.86. The 10-year fell 7 bps to 4.34, while the 30-year fell 5 bps to end the day at 4.93. Now, while they are still higher than where they were when the conflict began, the hope is that we're going to see lower yields in the months ahead. But listen, this market is still trading on headlines, not resolution. Despite the optimism, the reality on the ground hasn't changed nearly as much as stocks Suggested Iran may be talking about making a deal and ships may start to move through the strait, but global ship owners remain cautious. Tankers are not suddenly going to just start to pull up their anchor, and war risk insurance premiums are not going to suddenly plunge. Mines don't magically disappear— we talked about this yesterday— and global energy flows do not normalize overnight. But the headlines do suggest hope. And then there was the Fed, uh, there was the Fed. St. Louis Fed President Alberto Musallam reminded investors yesterday that inflation risks remain elevated, while Chicago's Fed President Austan Goolsbee warned against assuming the Fed can just simply rush in and cut rates, suggesting to me that the Fed is not rolling over and playing dead just because oil had one big down day. At the same time, we got some good economic data showing that the labor market remains resilient. ADP employment payrolls came in stronger than expected, suggesting companies are still hiring despite all the geopolitical chaos and economic uncertainty. And that's a positive. So when you put it all together, yesterday was a perfect recipe for a melt-up in stocks, causing the S&P, Nasdaq, and Russell to clock in at new highs. But remember, until the Strait of Hormuz is truly open, commercially operational, fully insured, mined, protected, and functioning normally again, this story is not over yet. Now this morning, oil is down another 2.6%, uh, or $2.50 a barrel at $92.60, sitting just atop the short-term trend line at $90.60. That's a positive. What we need to see is oil breach that support And if we do, then we could see oil test into the mid-80s, and that would create even more excitement for oil. Go back to the pre-conflict levels, which is down in the low 60s. You need to see a complete end to this conflict and a normalization of global trade. Now, gold was up $135 yesterday. It's up another $42 this morning, now trading at $4,734. That's up, you know, $240 since just last week, all on the idea that once the conflict ends, the inflation threat disappears, rates are going to fall, the dollar will weaken, and Those are all positives for gold. We're now kissing trendline resistance at $4,775. A failure to push up and through means that we probably retest the $4,500 level. If we do push up and through, then you can expect to see gold rally to $5,000, I think, fairly quickly. The VIX traded down to 16.20 in the pre-market yesterday morning, right, on the headlines that suggested there's a deal, which only gave stocks more of a reason to surge. It ended the day at $17.39, and this morning it's up 10 cents at $17.49, suggesting still that investors are still betting on a deal, right? They remain calm. Earnings today include McDonald's. That's all about fast food and consumer discretionary. Airbnb, think travel and leisure and consumer strength. Coinbase, right, speaks to the crypto and financial tech sector. Uh, Cloudflare, it's all about cybersecurity and AI infrastructure. Affirm, it's about consumer finance. And Rocket Labs is about aerospace and defense and space exploration. It's really another proxy for the tech defense spending sector, right? And let's round it out with Warner Brothers Discovery, and that's all about media streaming and advertising. ECO data this morning, Challenger job cuts. We're going to get year-over-year unit labor costs, which are expected to be down. That's a positive. Initial and continuing jobless claims, right? Always every Thursday. And remember, tomorrow's the big day. At 8:30, we're going to get the April non-farm payroll report. You can bet that it's going to be widely watched and interpreted. European markets this morning are all teasing around the flatline. Not one country stands out. They're all right around unchanged. US futures are attempting to push higher again. Dow futures up 32, S&P's up 10, the NASDAQ's up 42, the Russell is flat, but it had a very good day yesterday. The S&P closed at 7,365. That's a new century, up 105 points, closing again at a new high again. Now we are now in uncharted territory. Trendline resistance is essentially non-existent. Support is down at the 7,100 level at the moment. This could really go either way, so strap in. You can call me at 561-931-0190 and let's talk about how Slatestone Wealth can help you navigate all of this to help you reach your end goal. Okay, so like I said, this is going to start the family cookbook that I've been talking about. So we're going to— I'm introducing today Papa Richard and his El Camino cheesesteak, and there's a story behind that. My father didn't cook in the kitchen. He cooked on a 4-foot flat-top grill that he got from a restaurant, uh, in Boston that had gone bust. He loaded it up on the back of his El Camino truck. He strapped it in, he drove it all the way down to the Cape, dragged it up on the deck. It was technically illegal to have a thing like that on a deck outside the house, right? You're just waiting for the house to burn down to the ground. Now, it never did. Instead, it set the stage for the summer scene. That was my boyhood. Now, Saturday afternoons, the air tasted like salt. The whole family descended on the Cape. 30 people, loud enough to wake up the dead. Uncle Tony walking up the deck stairs carrying wooden crates of tomatoes and grapes. You see, he was a salesman, a fruit salesman in Boston. He wore a black eye patch after getting hit by a delivery truck that was full of melons. Anyway, Uncle Tony brought all the fruits and vegetables to feed the family table every weekend in the summer down at the Cape. Now for this, for the cheesesteak, you need the ribeye steak, you need peppers, onions, and mushrooms, olive oil, melted Velveeta cheese, and of course You need the roll. Now we call them submarine sandwiches because of the way they look, right? Like, look like submarines. Now you really have to begin by freezing the steak the day before so that you can slice it paper thin. Now my father used to use a commercial-grade meat slicer because it always works the best. So now you slice the meat and you set it aside. You slice the peppers, onions, and mushrooms. We're going to call those the veggies. For the sauce, You gotta take a brick of Velveeta cheese, right? Cut it into chunks, put it in a saucepan, and melt it very gently on low heat with a splash of milk. Stir it steadily and turn until it turns into this smooth, obscene, gooey golden sauce. Keep it on simmer so that it stays— so it stays liquidy, right? Now heat up a bit of olive oil on the griddle or on a sauté pan, whatever you're using. Add the veggies and sauté them until they're soft and a bit caramelized. Next, lay your perfect paper slices of meat down on the griddle or the pan and let the ribeye cook. With these thin sliced ribeye, once the red is out, it's done. It's a beautiful brown color. While that's happening, split and lightly toast the submarine sandwich, right? The bread, butter it all up and toast it. When the meat is ready, grab the spatulas and go to town. Add back the veggies, combine the whole thing. Now you pour the Velveeta cheese on top. All very theatrical. Scoop the whole glorious goodness up onto the rolls and press it down with the back of the spatula so that the cheese marries with the bread and the juice starts running out the sides exactly the way that it's supposed to. Now you serve this immediately. No plates required. This is the kind of food you eat standing up, leaning over the deck railing, smelling the salt air. It is just— every time I think about that, it just reminds me of my childhood at the beach. In any event, look, today is a beautiful day here in South Florida. The skies are blue, it is not cloudy, uh, the sun is out. I think it's going to be, uh, in the mid-80s today, and it's starting to get a little bit summery around here, so you can feel the humidity in the air. Until tomorrow, take good care.